Business

Asia markets hit as Syria fears spark global sell-off

  • 28 August 2013
  • From the section Business

Asian stock markets have fallen, extending a global sell-off sparked by growing fears of a military strike against Syria.

Japan's Nikkei 225 index, Hong Kong's Hang Seng and Australia's ASX 200 posted losses of more than 1%.

This follows declines in US and European markets on Tuesday.

Speculation of a strike against Syria, also triggered fears over global oil supplies pushing up crude prices to an 18-month high.

Although Syria is not a significant oil producer, there are fears for the stability of the wider Middle East, which produces about a third of the world's oil.

"If Syria becomes drawn out and becomes a long-term issue, it's going to show up in things like gas prices,'' said Chris Costanzo, an investment officer with Tanglewood Wealth Management.

As well as the rise in Brent crude, the price of US crude jumped $3.09 to close at $109.01 a barrel.

'Worst-case scenario'

The fears of a strike follow reports of a suspected chemical attack last week near the Syrian capital, Damascus, which reportedly killed more than 300 people.

On Tuesday, US Defence Secretary Chuck Hagel said that American forces are "ready" to launch strikes if President Barack Obama chooses to order an attack.

President Obama is due to outline future US action on Syria in the coming days.

Analysts said that investors were concerned that the crisis may escalate and result in political and economic instability in the region.

"People worry about this becoming a worst-case scenario and turning into a regional conflict," said Bill Stone, chief investment strategist at PNC Asset Management.

On Tuesday, Germany's Dax and the French Cac 40 indexes ended down about 2.5%. In London, the FTSE 100 index closed down by 0.8%.

In the US, the Dow Jones fell 1.1% to 14,776.13, a two-month low.

Meanwhile, gold which is traditionally seen as a safe haven in times of uncertainty, rose $27 to $1,420 an ounce.

Risk premium

The Middle East contains some of the world's biggest oil producers, along with some important shipping routes.

Even before the latest developments in Syria, analysts were forecasting higher oil prices, partly because of supply disruptions.

Libya, one of the Arab world's biggest oil producers, has seen its production drop by nearly 60% due to strikes and security concerns.

Analysts said the uncertainty over developments in Syria had added to the worries of oil supplies from the region.

"As the rhetoric ratchets up around Syria, the geopolitical risk premium in the price of oil is once again widening," said Dominick Chirichella, of Energy Management Institute.

Goldman Sachs has raised its short-term forecast for the oil price to $115 a barrel.

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